Tuesday, 03 March 2015 12:28
Homeowners A home building and landscaping company purchased a lot for residential building. The lot was subject to restrictive covenants. The home builder planned to build two townhomes on the lot for sale to consumers. Although the home builder had heard rumors of soil settling in the residential development, he did not secure any independent soil testing on the lot before he purchased the lot. Eventually, the home builder’s lender required soil testing on the lot. The testing revealed undocumented fill and inconsistent moisture levels. The lender recommended the complete removal and replacement of the existing fill material before building on the lot.
The home building and landscaping company maintained that the lot contained backfill that had been improperly compacted requiring extensive additional work to get it ready for construction. The home building and landscaping company sought to recover the costs of the soil remediation on the lot. The project developer maintained that there was no implied warranty in the sale of unimproved land and, therefore, the project developer was not responsible for the costs of the soil remediation.
The home building and landscaping company brought a lawsuit against the developer responsible for having the substandard soil work completed on the lot. The trial court held that the implied warranty did not apply to the sale of a lot without a dwelling.
The Court of Appeals of Iowa agreed. The Supreme Court of Iowa then considered the issue and held that the implied warranty of workmanlike construction does not apply to the sale of a lot without a dwelling. The Court reasoned that an implied warranty is the creation of the courts and intended to protect residents from substandard living conditions. The purpose of the implied warranty is to redress the disparity in expertise and bargaining power between consumers and builder-vendors, when the former would have difficulty in discovering latent defects in complex modern residential structures. As a result, the court declined to extend the implied warranty to the sale of land between developers who are able to protect themselves through express contract terms and soil testing.